Breaking Down the the Appraisal ProcessAcquiring a home can be the biggest transaction many will ever consider. It doesn't matter if it's a primary residence, a second vacation property or one of many rentals, purchasing real property is a complex transaction that requires multiple people working in concert to see it through.
You're likely to be familiar with the parties having a role in the transaction. The most known person in the transaction is the real estate agent. Next, the bank provides the money needed to fund the deal. Ensuring all aspects of the transaction are completed and that a clear title transfers from the seller to the buyer is the title company.
So who's responsible for making sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Arizona licensed appraiser from Scott Appraisals will ensure you as an interested party are informed.
Inspecting the subject propertyOur first responsibility at Scott Appraisals is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the condition a typical person would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the home, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.
Once the site has been inspected, an appraiser employs two or three approaches when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostHere, the appraiser analyzes information on local construction costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Sales ComparisonAppraisers can tell you a lot about the neighborhoods in which they appraise. We thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.
Valuation Using the Income ApproachA third way of valuing a house is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Arriving at a Value ConclusionAnalyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's market value Depending on the specific circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. Here's what it all boils down to: An appraiser from Scott Appraisals will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.